Taipower eyes floating energy price index

Taipower (台電) Chairman Huang Jung-chiou (黃重球) yesterday announced the company's request to form a floating price index to better reflect the cost of fuel consumed when producing energy.

According to Huang, fuel accounts for 66 percent of the company's costs and requires a more accurate price index. He further stated that the decision to implement the change remains the domain of the Ministry of Economic Affairs in cooperation with the Legislative Yuan.

Huang explained that the price of energy is determined by the cost to produce it. Huang said that the company may seek to lower costs not related to fuel by creating new investments or lowering budget amounts for maintenance and payroll. He stated that he has, however, little control over fuel expenditures.

In addition, Huang emphasized that amid increasingly more stringent environmental regulations, the cost of producing energy has grown rapidly.

When it comes to the cost of fuel, Huang noted that mechanisms in neighbors Japan and South Korea allow energy producers to initiate periodical adjustments to the price of energy to reflect shifts in the cost of energy production without the government's consent. Energy producers may initiate price adjustments for time periods ranging from 3 months to a year, said Huang.

Huang added that the establishment of a new energy price index is expected to be a complex undertaking, as the mechanism needs to reflect the weighing of the wide array of energy sources such as coal, natural gas, fossil fuel and nuclear power according to changes in the price of fuel in the international market.

Huang pointed out that fuel prices have seen marked volatility throughout the past decade and that without a precise index to base decisions on, the price of energy is a process wherein opposing political opinions clash. This is because of difficulties when attributing required price changes to fuel related expenditures or other expenditure.

According to Huang, volatility in fuel prices is expected to be minimal over the intermediate term, and that the company is still formulating its energy price index.

Meanwhile, Taipower last year submitted a revised energy price index draft proposal to the Legislative Yuan, which is still awaiting review, delayed by an immense collection of backlog bills.